In HN the general feel I've gotten for interview problems is that people prefer being given a day or two to accomplish a small coding project instead of being given a coding problem on the spot.
I agree with that approach as well, but it's probably because I consider on the spot coding problems to be nerve-wrecking.
I am looking for a new job these days. Fine if the first job you come across is ideal, and the test is OK. But its going to be frustrating if I have to dig into a lot of my personal time doing coding tests, because I want to apply for a few jobs and see what one is best.
I would rather code with the interviewer, and let him know my thought processes, and why I do things the way I do.
I agree with that approach as well, but it's probably because I consider on the spot coding problems to be nerve-wrecking.